|
II. Direct Taxes Case Laws:
1. Rajesh Rajkumar Nagpal Vs. ACIT, I.T.A. No. 261/Mum/2019, Date of Pronouncement: 16.03.2020, ITAT - Mumbai
Whether
reimbursement of business expenditures covered under section 2(22)(e)
of the Income Tax Act, 1961 as deemed dividend, Held: No
Brief Facts:
The assessee being resident individual was assessed for year under
consideration u/s 143(3) on 28/11/2016 wherein it was saddled with
addition of deemed dividend u/s 2(22)(e) for Rs.1.21 Lacs. The reason to
make the stated addition was the fact that the assessee held 22% shares
of an entity namely M/s Piem Hotels Ltd. (PHL) It was noted that
payment of Rs.1.21 Lacs was made by the said entity for Citibank Credit
Card held by the assessee. Therefore, it was alleged that the company
was making some kind of advances to the assessee in the form of credit
card balance, from which he was incurring the expenses. Accordingly, the
said payment was treated as deemed dividend u/s 2(22)(e) and added to
the income of the assessee.
Before
learned CIT(A), the assessee submitted that the assessee was receiving
salary and commission from M/s PHL. It was explained that most of the
credit card expenses were paid for by the assessee himself from his own
bank account except for certain items of expenses which were incurred by
the assessee but paid by the said company. These expenses were incurred
for and on account of the company and were on account of renewal of
membership of the Entrepreneurs organization, USA, covering case for
Apple Ipad provided by the company to the assessee for official use and
Matrix Card for international roaming mobile expenses during foreign
travel for professional work. Therefore, it was submitted that the
provisions of Sec.2(22)(e) were not, at all, applicable. The Ld. CIT(A)
agreed with the said submission but ultimately concluded that it would
be personal expenses for assessee which is met by M/s PHL and therefore,
the addition would have to be confirmed. Aggrieved, the assessee is
under further appeal before us.
Held:
The Hon’ble ITAT held that the provisions of Sec.2(22)(e) were not
applicable since the payment was mere reimbursement of expenditure by
M/s PHL. However, Ld. CIT(A) proceeded on wrong footing that the same
would be personal expenditure and hence, disallowable completely
overlooking the fact that the said expenditure has never been claimed by
the assessee anywhere while computing his income. The said expenditure
was booked as business expenditure by M/s PHL. Therefore, the impugned
additions could not be sustained.
Therefore, the appeal of the assesse stands allowed
(Please click here for judgment)
2. DCIT Vs. Birla Nagar Jan Sewa Trust, I.T.A. No. 147/Agra/2017, Date of Pronouncement: 20.09.2019, ITAT - Agra
Wherein
the payment has been made to the person covered under section 13(3) of
the Income Tax Act, 1961 at reasonable rate, as remuneration for
services rendered by him to trust, then the benefit of exemption u/s 11
of the Act cannot be denied,Held: Yes
Whether
the reasonability of the payment would be check not only on the basis
of degree of the person but also after considering the other comparable
instances; such as seniority, competence, experience, qualification,
expertise, etc., Held: Yes
Brief Facts:
The assessee is a charitable trust registered and is running medical
institution (hospital) and also in the imparting of education. The
assesses trust besides have registered u/s 12AA of the Act was also
approved u/s 10(23C)(via) of the Act. The assessee had filed return of
income declaring the NIL income for the AY 2012-13. However, the
assessment was completed by the AO by assessing the income of the
assessee to the tune of Rs.7,34,12,020/- by not allowing the exemption
u/s 10(23C) (viia) viz-a-viz Section 11 of the Income Tax Act, 1961
while recording in the assessment order that the payments were made to
the prohibit person u/s 13(3) of the Act at unreasonable rate. Feeling
aggrieved by the order passed by the AO, the assessee filed an appeal
before the CIT(A).The CIT(A) found the payment made by the assesse trust
to the alleged persons as reasonable hence allowed the benefit of
exemption under section 11 to the appellant. The Revenue feeling
aggrieved by the decision filed the appeal before the ITAT.
Held:
The case of the AO in the present case is that the assessee has been
making the payment to Doctors by way of salary and professional fees
which is in excess of what may be reasonably paid for such services by
the comparable doctors in the Gwalior and for that purposes the AO has
brought on record the comparable instances of Doctors working in Gajraja
Chikitsa Mahavidhyalay and Chirayu Medical College.
In
this case, the Hon’ble ITAT held that the AO has brought on record the
comparable instances of the Gajraja Chikitsa Mahavidhyalay and Chirayu
Medical College on record but failed to bring on record expertise,
qualification any other factors like seniority competence ,experience,
qualification etc.It is expected from the AO to bring on record the
comparable only after bringing on record the comparison between two
doctors not only on the basis of the medical degree but also on the
basis of expertise etc.
In the result, appeal filed by the Revenue is dismissed and the order passed by the ld. CIT(A) was sustained.
(Please click here for judgment)
|
New User? 
Subscribe Now